Taking A Tip From Uncle Sam

January 17, 1986|The Morning Call

It is common knowledge that for many years Uncle Sam has been living beyond his means. Once or twice a year the news goes forth from Washington that Uncle's bank account has suffered yet another bout of overdraftitis. This semi-annual diagnosis of fiscal irresponsibility is accompanied by a Greek chorus from Capitol Hill that makes more common noise than common sense, as lawmakers place still another sticking plaster on the seriously ill patient.

Now, however, comes word from Washington that Uncle's nieces and nephews are practicing privately the kind of disastrous fiscal management that their uncle practices publicly. We, the American taxpayers, who are Uncle Sam's insurance policy against bankruptcy, are following our Uncle down a road that may very well lead individuals and businesses into the bankruptcy court.

For three decades before 1980 America's public and private debt ran along constantly at about 1 1-2 times the gross national product. There was a stability here that reflected the growth in the national economy. Our borrowing kept pace with our ability to pay our debts. But sometime in 1981 that safe ratio changed. Then, for the first time since World War II, both Uncle Sam and his nieces and nephews began borrowing at an upward rate. Today, personal and business debt accumulation is larger in relationship to the GNP than is conducive to fiscal security.

Given Uncle Sam's penchant for profligacy, this trend in private and business debt is not surprising. That, however, in no way reduces the risk to those borrowers who have followed Uncle Sam's dangerous example. Ironically, what has occurred in the private borrowing pattern is exactly the opposite from what President Reagan and his fiscal wizards predicted. In 1981, they set a course that was supposed to lead us to the port of Greater Savings and the safe harbor of Increased Investment. Alas, we have come to dock at the port of Diminished Savings, at the end of Overconsumption Street.

Worse, our creditors are no longer to be found exclusively in the First National Bank of Main Street, U.S.A., but among bankers in capitals in Europe, Latin America and Japan, from whence comes much of our borrowed money. "Keeping up with Uncle Sam" may come to replace "Keeping up with the Joneses" as the catchword for showing off the latest finery bought with borrowed funds.

However, it's well to bear in mind that when a creditor forecloses on those who try to keep up with the Joneses, it's a lot more painful than when Uncle Sam has to go to the well for another pail of borrowed water. That's why Uncle Sam's prudent nieces and nephews would do well to live within their means. Otherwise, who will be around to bail out the last of the big-time spenders, their Uncle Sam?